How Unscaled Companies Are Rewriting The Rules Of Business And Policy

In his recently released book, Unscaled, venture capitalist Hemant Taneja writes about the next chapter in the Silicon Valley story. The book chronicles Silicon Valley’s transition over the last few years from an enterprise software-focused community to one developing platforms for all facets of society. Taneja, who has been a successful entrepreneur and venture capitalist in Boston and the Bay Area, uses several of his portfolio companies, including Stripe and Snapchat, as examples of the ambitious technology platforms that entrepreneurs are building.

The prequel to this story is the well-chronicled rise of “social, mobile and cloud” - or social media, mobile phones and tablets, and the migration to cloud computing solutions. Taneja adds two important links to this chain – artificial intelligence and Big Data. With new tools for AI and analytics, and an already reduced cost of doing business, writes Taneja, even early-stage Silicon Valley startups have been able to compete head-on with large companies in their core business areas. Instead of just developing software to make business more efficient, startups are becoming platform enablers of commerce using Big Data, analytics and AI to increase the speed of product iteration. Taneja uses Stripe, Snap and Warby Parker as examples of companies that have remained, by and large, extraordinarily product-focused, and were able to ignore other things that go with being a global company, such as infrastructure, human resources and operations, until they had to. They “rent” as much as they can for as long as they can.

When speaking with Taneja, he recognizes, as do most Silicon Valley veterans, that this model doesn’t yet work well for more complicated sectors, such as life sciences, space, hard sciences, or anything requiring the management of intellectual property, which defies iteration. While many scientists are trying to use Silicon Valley principles to speed drug discovery and share knowledge (pre-patent), there are vested interests and government regulations that prevent them from doing so. Today software for the sciences is still predominantly about efficiency. It will slowly move towards discovery, and according to Taneja, will help shift the biotech and pharma sectors from the blockbuster model to more narrowly targeted communities and populations.

The recent scandals at Facebook and Uber underline the growing pains facing fast-growing, unscaled companies that are readily embraced by consumers but unprepared for their responsibilities as a corporate actor. “Move fast and break things” might have been okay in the past, but not in an economy where a small startup is also a household brand. Taneja cites Warby Parker as an example of a company that has been thoughtful about its growth, and identified the right time to invest in corporate leadership, infrastructure and HR as it moved from a web-based retailer to bricks and mortar stores.

AI and a new generation of startupsHemant Taneja

The book also provokes some important public policy questions that have yet to be discussed in Washington or state capitals. Taneja talks about Khan Academy, a non-profit online learning platform used by an enormous number of schools and families around the world. And yet, the tenets of Khan Academy’s successful use of technology to simplify and teach concepts has yet to be embraced in education policy or practice.

Likewise, the unscaled phenomenon and the rise of unicorns presents interesting questions for our oversight of the corporate sector. Is a unscaled company like Airbnb a monopoly? It has the largest share of rooms of any hospitality brand, but has minimal assets. It’s not like Microsoft or ATT – where market share could be measured in traditional ways and anti-competitive practices could be monitored and remedied with oversight. Its not clear how that our federal agencies or policies are prepared to regulate an Airbnb or Uber in this way.

Taneja talks about the importance of connecting technology, and it’s often-insulated workforce, with the values of society. He hopes the book leads to a discussion about responsible innovation that focuses on transparency, accountability and plain English explanations about technology and its impact. He calls for an “algorithmic canary” for bad actors in technology that sounds the alarm for industry and the general public before its too late.

For the business reader, Taneja provides some good insights and case studies about the trends in Silicon Valley and what it means for global technology and business. For the policy reader looking at the impact of technology on society, the book provokes lots of questions that we will be grappling with for many years to come about our definition of a “company” and what the impact of AI and analytics will be on society.